Does the House Always Win?

If you were under the impression that casinos have an equal chance of paying out and losing money, I am sorry to tell you that you are mistaken. A casino is a business like any other. Most casinos have a very strict business model in place designed to maximise profits and minimise losses.

Any business would be completely silly to rely on fate to determine their profit margin. So, now that we have established the fact that the house always wins, let’s take a look at exactly how casinos go about making a profit.

The House Edge

All casino games are designed to provide the house with an “edge”. This statistical surety stacks the odds firmly in their favour. It doesn’t matter what type of casino game you choose to play, the casino itself will always have the greatest chance of winning. All casino games, including slots, poker, blackjack and roulette, are designed to give the casino a slight advantage in terms of the potential payout. Let’s take a look at a simple example.

In roulette, the highest payout is 36:1 for correctly guessing a single number. However, the wheel itself also has a 0 and sometimes a 00. This means that the actual odds of winning are really 37:1 or 38:1.

The casino edge can be used to represent the gross profit the casino can expect to make from each game. This is a reliable figure, which brings in casino revenue in a steady steam. Casino games with a lower house edge bring in a smaller profit, while games with higher edges bring in profits of up to 25% or more. Going back to our example, the house edge on a double zero roulette wheel is around 5.26%. In terms of numbers, this means that for every 1 million coins bet at the roulette table, the casino can expect to make a profit of just of 50 000 coins. The other 950 000 coins are returned to the bettors as winning bets.

Common Misconceptions

Casinos are not out to bankrupt players in the first five minutes. The idea is that in the end, the casino wants to have players walking out with a little less money than when they walked in. Even players who are aware of the house edge still don’t fully grasp the implications on their bankroll. Most people believe a casino game with a house edge of 5% will pay back 95% of their bankroll. Therefore, if someone approaches the roulette table with 100 coins, after a few hours of playing, they expect to have lost around 5 coins and still have 95 coins left.

What these people fail to understand is that the house edge only applies to the total amount wagered and not the starting bankroll. Let’s assume this same person is making a 5-coin wager on every single spin of the roulette wheel. On some spins, he will win money – and on others, he will lose money. After one hour of play, he has wagered 250 coins and after four hours, he has wagered 1000 coins. If the house edge is in accord, he can expect a loss of 5% of his total wagered amount, which is 50 coins. That is 10 times higher than what he expected after a few hours of play.

The Time Factor

With casino gambling, the longer you play, the more the odds will line up with the theoretical house edge. In the short term, a player could easily win or lose a large sum of money. Over a much longer period, the house edge will always kick in and leave the player with a little less money than what he started with. Casinos know this all too well and take certain steps to ensure that players spend a bit more time on the gaming floor. This is why there are never any clocks or glass windows inside a casino. Unless you are regularly checking your watch, the passage of time is completely unknown. The free drinks also help to ensure that players are having a good time and don’t want to go home.

Games with the Lowest House Edge

While the laws of probability are always stacked against the player, the house edge actually varies from game to game. The casino game with the lowest house edge is actually blackjack. If a player follows a perfect betting strategy, the house edge can be as low as 0.5%. At some casinos, this can even drop to 0.28%. After blackjack, craps is actually the next lowest at 0.8%, and then baccarat at 1.06%. In each case, the smaller edge only applies if the player is playing the perfect strategy. The house edge goes up significantly for less expert wagers.

Roulette is usually one of the most popular casino games, even though it has one of the highest edges of any table game on the floor. The house edge for roulette sits at around 5.26%. Slots, which are usually the most popular, have a house edge that can climb as high as 17%. With games like keno, the house edge tops out at a massive 25%.